Tag Archives: balance transfer

How to Choose the Best Credit Card

Consider something called "e-mail."
Consider something called “e-mail.”

Getting mail was exciting when you were a kid because it was usually something fun like a present or an invitation. And as an adult, sometimes it probably feels like you got accepted to Hogwarts when you open your mailbox, so many letters fly out.  The child inside you gets excited but soon you realize they’re all emblazoned with the Bank of America, Discover, or Citi emblem, not the Hogwarts seal. As a grown up, sometimes it seems like the only people who send mail anymore are the multitude of banks vying for your application for a new credit card account and the occasional magazine company that really, really misses you. When your junk mail reaches the point of utter chaos, it can be so overwhelming that you end up throwing it all away or making a hasty, uninformed decision when you need new credit.

But don’t let the inundation of information overwhelm you, nor the disappointment that you still are not a wizard in training. Whether you’re a first time borrower or a seasoned veteran at getting late notices, it’s a good idea to compare what’s out there to select the best credit card for your needs.

House of Credit Cards
House of Credit Cards

Below is an overview the basic types of credit cards you can choose from based on the benefits each one offers.

Low Interest: The focus of a low interest card is to make it easier to carry a balance from one month to the next without having to make continuous balance transfers or open new lines of credit. A lower interest rate will result in lower fees each month while you pay off your card or accrue new debt that you plan to pay off later. The interest rate on these cards sometimes increases after a promotional period, which makes them useful for balance transfers or short term hardships.

"I found this card in the food court at the mall!"
“I found this card in the food court at the mall!”

Balance Transfer: Balance transfer cards can help you pay down a credit balance that you have been carrying. Many balance transfer cards have a promotional period during which the interest is at zero or low percentage rate. Balance transfer cards are popular for people who want to consolidate their debt in order to make their payments easier or lower, as well as people who have one credit card with a high balance and a high interest rate. With balance transfer cards, there is usually a one-time balance transfer fee added to the total balance.

Cash Back: Cash back cards give you cash in return for making purchases on your credit card and paying off the balance. Cash back cards reward people who are dedicated to paying off their balance each month and the reward can go toward the balance itself or be redeemed in a checking account or a check. Cash back cards often offer special promotions with particular restaurants or retailers, as well as higher cash back percentages in certain categories. Cash back cards are popular for people who like to charge most things on a credit card, but are good at paying off the balance each month.

Diamond-Lighthouse-selling-credit-card-old-dude-chilling-phone
“I’d like to purchase twelve thongs, please.”

Rewards Points: Points cards are similar to cash back cards, except the account holder get points in return for purchases instead of cash. The points can usually be used toward purchases through an exclusive shopping site for cardholders or converted to payments on your credit balance. Some points can be converted to cash. Some points cards offer hotel or airline rewards points, which often offer bonuses for purchasing travel during various times or give a large amount of points to new card holders. Points can be used for free airline tickets or even free hotel stays.

Whether you’re an avid traveler, a lover of saving money, or a fan of getting rewarded for your diligence, you have choices that will suit your spending style and your financial needs. Most banks offer multiple cards, so it may be a good idea to choose the card type that fits your lifestyle first, then compare each bank’s offerings to choose one that makes sense for your financial goals.

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“You ruined my credit…why am I smiling??”

 

The Ups and Downs of Doing a Balance Transfer

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So you’ve gotten yourself into some credit card debt and you’re feeling a little overwhelmed about how to get out of it. It seems like every time you look at your balance, it’s gone up way more than you expected because of those pesky interest charges, and you’re beginning to wonder whether you’ll ever be able to get it back to zero.

But then, a beacon of hope arrives in the mail. Your bank is telling you that you can put a stop to those interest charges—at least for a little while—by putting all of that debt somewhere else. Or, maybe a new bank is telling you to bring your debt over to them by opening an entirely new account. Whether or not you should take advantage of one of those balance transfer offers depends upon the current state of your credit and the merits of the offer itself.

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If you’re interested in opening a new card, one of the negative sides is that, even though the direct mail letter may make it seem like you can basically call them and the card will appear in your hand, you still have to apply for the new line of credit. Because of that, the process can take time and you risk being denied. Daily Finance advises against applying for several lines of credit at a time because it will work against your credit score, decreasing your chances of actually getting a new credit line. However, if you are approved, your credit score could increase because your credit utilization rate (or your credit-to-debt ratio) will improve.

Using an existing line of credit may be a great way to consolidate your debt as well, especially if you already opened a new line of credit in order to complete a balance transfer in the past. CreditCards.com shares the important reminder that you may not be able to open a new line of credit because creditors could see you as a risk if you continue to carry a balance even after getting new credit. Being seen as a risk would make it harder for you to get different types of credit, such as loans for cars or a home.

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Regardless of whether you need to open a new account or are considering using an existing line of credit, make sure to read the fine print to find out how much it will cost. Every balance transfer will have a fee associated with it, regardless of the bank or the newness of your account, but some balance transfer offers have lower fees than others. Another consideration is the length of the zero or low interest rate promotion: some give you 18 months to pay off the amount, while others give you 24 months. USA Today makes an important point for debtors: creditors have no legal obligation to remind you of the end of your promotional rate, so it’s important to be diligent about paying off the entire amount in time or be prepared for the appearance of interest charges when the promotional rate expires.

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In addition to enjoying a lower interest rate on your debt, you’ll have the added benefit of easier, streamlined payments. If you have found yourself confused by due dates and bill cycle closing dates, this may be a very real perk to help you get back on top of your debt. The phrase “consolidating debt” sounds a lot fancier than it really is: all it means is that you put all of your debt in the same account, typically using a method like a balance transfer. But, keep in mind that many balance transfer offers have a limit on the amount of debts you can transfer.

If you do a balance transfer, be careful not to forget about the debt or only pay the minimum just because you are enjoying a zero percent interest promotion. Make regular payments and remember, if you have zero debt, you won’t have to worry about finding a card with zero interest!

Solving the Credit Card Debt Enigma

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Everyone hears about how ‘Americans are in debt,’ but what does that specifically mean?  Where are these debts stemming from, and most importantly, how do we combat them?

There are 4 major categories that dominate the debt umbrella.  These are credit card, student loan, auto loan and medical expenses.  Most Americans dealing with significant debt face at least one of these main groupings, and sometimes all four.  Mortgage debt is another big one, but this obviously only affects Americans who own property.
Continue reading Solving the Credit Card Debt Enigma